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Property Investment Strategy - Student Housing

Mike Cathell, Realtor serving Lee County, Florida wrte an intresting post on Student Housing as an investment strategy that I felt warranted a re-blog. The title Property Ivestment Strategy-Student Housing speak for itself.  This in my opinion can be a very lucrative endeavor...so if you are in a college town, this may be a strategy to consider.  Please stop by Mike's blog and leave him a comment.

I will be posting different Investment Property strategies over the next few weeks.  Is the reason I am starting with the category of Student Housing because I now officially have three children in college?  Jason is at University of South Florida studying Engineering to build prosthetics (has Associates in Math).  Brian has an Associate degree and is transferring to University of Florida to study and eventually teach English Literature.  Lauren is starting at Edison College in pre-med.  Student Housing seems to be a frequently visited category!

In recent articles from such magazines as "Commercial Property Executive", one of the Investment Property niches showing an increase in purchases is multifamily projects.  Vacancy rates are dropping.  One factor has been the foreclosure crisis which have forced many previous homeowners into rental multifamily facilities.  Another is the topic of this blog - more students than ever understand the need for advanced education.  Many of these students are going away to college to explore their first freedom of living away from their parents.  Because of the increase in student population, student housing has become an Investment niche.

My one son is an example.  To get on-campus housing, the application has to be submitted over a year in advance.  Students in campus housing need to sign a year lease even if they will not be living there over the Summer.  Off campus housing also fills quickly.  My son signed a lease starting on July 1 even though classes do not start until the end of August.  This complex has over 200 apartments which accommodate 3 to 4 students each depending on floor plan.  When we looked at therm, there were only 31 "rooms" (not apartments) available for the Fall, 2012 semester.  So, a lease was signed and a deposit left.

My team has been researching foreclosure condos in several Florida cities.  Their number has already started decreasing.  Investors are buying condo and multifamily communities to cater to students.  Some investors are doing this with single family homes but my opinion is that multifamily units have more advantages for the Investor.  A few points to keep in mind:

  • Higher cash flow per square foot - my son's apartment has 3 bedrooms, 3 bathrooms, great room, kitchen, dining room, and laundry.  Each student pays $550 per month for their bedroom and bathroom and share the common areas.  Comps for area show that similar condos rent for $1350 to $1450 per month; this student unit has a $200 per month higher cash flow.
  • Continuous cash flow - the student apartment has a lease for each "bedroom".  If one student defaults, the unit is still receiving income from the remaining students living in the unit.  A single tenant condo- tenant defaults, you could go several months until tenant is replaced and income starts again.
  • In some cases, guaranteed rent - if the student is under 18 years of age or does not have a sufficient income, then the parents sign the lease as guarantors.  I would like to believe, most parents would pay the rent rather than have their college student learn what the word "eviction" means.
  • Many of the staff can be students who will work for lower pay plus in some states you can receive tax breaks for giving students employment.
Later, I will write about the different needs of this type of community to keep it fully leased and make it desirable for students and their families alike.
 
BTW, here's my three on my daughter's graduation day -
 
Commercial real estate
 
 
 

Mike Cathell, Business Director and ePro Realtor

New Horizon Real Estate Group, Inc

Serving all of Lee County - Ft. Myers, Cape Coral, Estero, Lehigh Acres & Ft. Myers Beach, Florida

Cell: (239)  770-6250    

Email: Mailto:InvestSWFL@gmail.com


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Also blog at http://FloridaCoastrealtor.wordpress.com

 

 

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C. Lloyd McKenzie, MBA

Associate Broker

Berkshire Hathaway HomeServices

New Mexico Properties/Allstar, REALTORS

6739 Academy Rd. NE SU 200

Albuquerque, New Mexico 87109

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Areas Served: Albuquerque Metro/ Algodones/ Bernalillo/ Cedar Crest/ Corrales/ Edgewood/ Los Lunas/ Los Ranchos de Albuquerque/ Placitas/ Rio Rancho/ Sandia Park/ Tijeras

Comment balloon 3 commentsC. Lloyd McKenzie • June 22 2012 01:18PM

Comments

I saw this about a month ago and when i ran it by some investors they CRINGED at the thought of investing in student housing.

But then when I suggested they start with thier own kid, they were like WHAT AN IDEA!

Posted by Florida Tolbert Team Keller Williams Advantage, Million $ Guild Member Cert Luxury Home Mkting Spc (Keller Williams Advantage III Realty in Lake Nona) over 5 years ago

Hey Kevin...Thanks for stopping by.  As a parent, of two sons who lived in student housing, I know that it could be relatively profitable

Posted by C. Lloyd McKenzie, Living Albuquerque over 5 years ago

I agree with Kevin.  I would be a bit nervous with student housing, mostly because of repair problems and damage that might be higher with younger tenants.  Starting with your own kids would make sense and be a good way to test the water.

Posted by Doug Bullwinkel, NMLS #281609 (Academy Mortgage Group) over 5 years ago

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